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Steel & Tube stock plunges after OneSteel quits offer

Monday 20th October 2008

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Shares of Steel & Tube Holdings, which distributes steel building supplies, slumped by more than a fifth after Australia's OneSteel abandoned an offer for the company.

Steel & Tube dropped 80 cents, or 22%, to NZ$2.80 on the NZX today, sinking to an 18-year low after OneSteel abandoned an offer of NZ$4 a share for the 49% of the target company it doesn't already own.

OneSteel, Australia's No. 2 steelmaker, on Friday cited market turmoil and the recession in New Zealand as its reasons for quitting the NZ$175 million proposal.

The failed offer adds to casualties of the credit squeeze in New Zealand, after NZ Farming Systems Uruguay halted plans to raise capital to expand and PGG Wrightson failed to settle on its acquisition of half of Silver Fern Farms.

Steel & Tube today said profitability had actually increased by NZ$8.1 million in the first quarter and earnings growth would continue for the next month or so. Still, "there is considerable uncertainty for the second half of the year," chairman Dean Pritchard said.

The New Zealand economy may have extended its recession into the third quarter, according to the Treasury, and some analysts predict it will shrink again in current three months.

By Jonathan Underhill

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